Can The Big Three Survive Success?
Forget another bailout. GM, Ford, and Chrysler must keep winning on the sales floor.
Sometimes nothing can be more difficult to overcome than success. Just ask Toyota. In 2008, the Japanese giant overcame Detroit rival General Motors to become the world’s largest automaker. It didn’t take long for the headaches to begin.
Toyota soon found itself embroiled in a series of safety scandals, hauled before Congress, lambasted in the normally enthusiastic press, sued by its customers, and slammed with a fistful of lawsuits. U.S. regulators levied a series of record fines and empaneled two separate inquiries into potentially deadly defects. As if that wasn’t enough, an earthquake and tsunami in March 2011 in Japan crippled the automaker’s global production network. The result: Toyota last year stumbled to fourth on the global sales list.
And GM suddenly found itself back on top — not only regaining its position as the industry’s sales leader, but also racking up an all-time record profit for 2011. Barely two years after celebrating its centennial in bankruptcy court, the Detroit giant was back on top. Ah, the fickle finger of fate, as they used to call it on the old TV show, “Laugh-In.”
But lest the champagne corks pop someone in the eye, GM needs to hold back on the celebration. Take a look at the sales numbers for the first quarter of 2012. Toyota is back on top, narrowly outselling GM, Volkswagen, and the Renault-Nissan Alliance. With Toyota CEO Akio Toyoda promising a healthy 20 percent jump in volume for the full year, it’s anyone’s guess who will win the dogfight for all of 2012.
But perhaps that’s the good news. In decades past, Detroit’s Big Three had an uncanny way of snatching defeat from the jaws of victory — even if they didn’t realize it at the time. The fact is the Big Three took their own positive press clippings far too seriously, which made them fat and happy — as well as incredibly blind to the oncoming competition. The big question is whether that will happen again.
Most everyone agrees 2011 was a solid year for the Big Three, especially following the devastating body blows incurred during the global automotive downturn. Collectively, their losses had climbed to nearly $100 billion. It took a federal bailout to save GM and Chrysler, while Ford narrowly avoided Chapter 11 by having the luck or wisdom — take your pick — of mortgaging itself up to the proverbial eyeballs before the credit lines dried up following the Lehman Bros. collapse in September 2008.
The human toll was enormous. GM once employed nearly 1 million people. Today, it sends out paychecks to less than a tenth of that number. Communities across the country have had to cope with the loss of assembly and parts plants that once offered enormous tax bases and lavish local services. Those workers who remain on Detroit’s payrolls accepted significant concessions, while new employees earn half of what their veteran colleagues take home.
Yet, one could argue, that’s good news. The domestic OEMs are leaner, tougher, and recognize they’re no longer calling the shots. Mark Reuss, GM’s president of North American operations, likes to emphasize, “being competitive is no longer acceptable.” In Detroit-speak, competitive too often meant “good enough.”
The new mantra for all three automakers is “best-in-class.” To see what that entails, visit a few Detroit showrooms and test drive the all-new Ford Fusion, Dodge Dart, or Buick Regal GS. Yes, Buick. A brand many thought would vanish along with Pontiac, Saturn, Saab, and Hummer is now one of the market’s fastest-growing marques.
The Detroit-based OEMs are a dramatically different breed today, in part because they’re not really “domestic” manufacturers anymore. A full two-thirds of GM’s volume comes from abroad. Ford isn’t far behind, and after decades of functioning as a regional brand, Chrysler’s new masters want to turn it into a global player.
But old habits, the saying goes, die hard. Mark Fields, Ford’s president of the Americas, recently confided that you can’t change a corporate culture overnight, even with death staring it in the face. It is an ongoing process that will take years more to achieve. And, even then, there’s a need to move away from the American proclivity for sports metaphors. There’s no end zone, no field goals, no grand slams, and no slam-dunks. As Toyota painfully learned, it’s an endless “game,” the results of which can turn around in a virtual heartbeat.
Detroit is showing the sort of spunk and resourcefulness it hasn’t exhibited in decades. That’s good, because if what happened in 2008 and 2009 occurs again, the Big Three won’t have another shot. As GM CEO Dan Akerson recently acknowledged, there won’t be a second bailout. If his company goes back to doing things the old way, it wouldn’t deserve one, anyway. db
PAUL A. EISENSTEIN is a longtime automotive journalist and chief of The Detroit Bureau in Pleasant Ridge.